§ Statement of Purpose

The View from 1776 presents a framework to understand present-day issues from the viewpoint of the colonists who fought for American independence in 1776 and wrote the Constitution in 1787. Knowing and preserving those understandings, what might be called the unwritten constitution of our nation, is vital to preserving constitutional government. Without them, the bare words of the Constitution are just a Rorschach ink-blot that politicians, educators, and judges can interpret to mean anything they wish.

"We have no government armed with the power capable of contending with human passions, unbridled by morality and true religion. Our constitution is made only for a moral and religious people. It is wholly inadequate to the government of any other." John Adams, to the Officers of the First Brigade, Third Division, Massachusetts Militia, October 11, 1798.

§ Syndicate

The View From 1776

Why Government Is The Problem

As Friedrich Hayek noted (A Free-Market Monetary System), government monopoly of the right to issue currency is the ultimate source of our economic miseries.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 12:44 AM

We have to also consider "growth." During the early 1900's as during other periods, we had rapid economic growth. We were able to immigrate and put to work millions of people. In some cases, those who immigrated here went to work in the factories while others started businesses in their ethnic communities were immigrants tended to group for cultural reasons. But, growth was abundant.

We were able to have social, economic and monetary policies that seemed to work great because the expansion of the population stayed ahead of problems with the policies. As our nation matured and we slowed our growth and the effects of WW II wore off, we found the very policies we thought we good, dragging us down ever so slowly.

Many of the things we did required a "Ponzi scheme" type funding where a constant expansion of investors (tax payers) were required to offset the expanding cost of the policies we had put in place.

Yet, at the same time, the nations that had to buy from us after the destruction of WW II left their factories and other businesses in shambles, were rebuilding and competing with the U.S.

Instead of changing our policies, we made them worse by using debt to make up the difference. In 1968 we started borrowing $1 for each $1 of GDP growth and by the time of Bush II were borrowing $5 for each $1 and in real GDP, it was infinity since we were no longer actually growing GDP. Yet, we continued to try and "stimulate" the economy and pay for wars with borrowed money.

In a system like that, you get a rapid or parabolic rise in debt. We appear to have hit that point now at the federal level. But, it was personal, city, state and corporate debt before that which had already increased rapidly. The consumer debt especially, had been rapidly increasing for the last 20-25 years, taking savings from 11%-13% down to zero.

The interest on the debt at any level, takes away from the income. For consumers, each $1 of new interest was $1 less at the same time we under reported CPI and kept wages and social security checks lower thus, losing buying power.

The result of that is that any additional tax reduces the buying power of wages even more. They have said tax the wealthy more but, how? If the tax is high, they just move their money into tax free bonds or some other investment the government encourages with lower taxes or out of the country or they can even move.

Right now, many wealthy people are moving their assets and money out of the U.S. and buying homes in other nations to move to if things go bad here. They can afford to leave, while most workers in America don't have the same options and will be left here to pay the taxes hidden in prices if we put them on business since all business tax is passed on to the consumer. Not only is the tax passed on but all costs of doing the taxes is paid by the consumer.

As a result, the consumer buys imports if the government hasn't taxed them and boosted their prices as high as domestic made goods.

Again, we are looking at policies based on principles set 95 years ago and based on "growth" in money supply, population, GDP, and exports. "Growth" instead of "stability" was the cry. Now we are paying the price of those flawed principles. We needed growth but growth from necessity, not greed or flawed thinking. We put the cart before the horse.

Even today, our Congress is considering the immigration of 67 to 100 million people to pay for retirees that will increase from 36 million to 71 million over the next 21 years. Yet, all that does is keep the "Ponzi scheme" alive for awhile until it implodes like all Ponzi schemes do, as we just saw with Madoff who kept his going for decades.

Ronald Reagan: "In this present crisis, government is not the solution to our problem; government is the problem."

I am focusing on the phrase "in the present crisis". If alive, Reagan may see the present crisis differently, that the economic crisis America faces today is needing government to help correct it. He may see the present crisis as been caused by government, but a lack of government, having failed in its mandate to "protect the people".

The monetarist stance taken by The View is nonsense.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 12:30 PM

Actually, government is good when done properly so, I am sure Reagan would say government is needed but not this government and not at the federal level

As we can see, they are making things worse by trying to make them better. They may make things better for the people now but, it will be worse for those coming just as it has been now for so many decades.

However, in a sense, he is still right even in this present crisis because it is like the great depression in that the crisis is due to too much debt in people, cities and states more than the federal government.

So, they are trying to solve a problem with too much debt in the private, local and state level by creating a debt problem at the federal level too. Remember, the government has said it can't grow or tax out of the current debt and yet, they are going to add trillions that doesn't address the problem.

The problem is not too much, nor not enough government but too much debt held by citizens for homes, cars, furniture, clothes, etc.

We are now seeing government cutting wages and hours because the citizens have so much debt they can't get the tax revenues they need to pay government workers.

quote:
From Maryland to California, Ohio to Hawaii, governors have asked or ordered state workers to accept furloughs, salary reductions, truncated workweeks or benefit cuts. They say the concessions are a better alternative to further job losses in the face of record-breaking unemployment.http://www.financialarmageddon.com/2009/01/spreading-the-pain.html
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The Federal government has no money and the states don't and the people don't, to the level needed. Thus, even with the Fed borrowing, the people still won't have the money to spend to raise state and local tax revenues.

The Fed can't borrow the money to the degree they need so they will either have to let the people down on the promises government has made or "print" the money which will cause hyper-inflation at some point at the same time buying power is falling, jobs are disappearing and tax revenues are falling even faster.

In this crisis, the government borrowing more makes the problem even worse in that it speeds up the day we have a collapse but, maybe that is the goal. Create the collapse on their time table, get a new global currency, default or hyper-inflate out of debt and in a decade or maybe just several years, rebuild the nation.

The government knows this is unsustainable since they are the ones that put out the report that it is unsustainable.

We need "more government" at the local level but, can't afford it. At the local level is where economies are made strong or weak. At the local level is where people are supposed to pay the taxes for services like police and fire, water and sewer. But, we can't have more government that is actually serving the will of the people if you send all your resources to a wasteful and inefficient central government.

Hundreds of years ago, we knew that the control of currency was the key to the control of government.

quote:
Nathan Rothschild said (1777-1836): "I care not what puppet is placed on the throne of England to rule the Empire. The man who controls Britain's money supply controls the British Empire and I control the British money supply."

History shows that he is right in nation after nation. Control the money supply and you have the power to create the boom/bust cycles because human nature and the relationship to money supply in a nation causes people to become overly optimistic or overly pessimistic when the cycles change and that, drives the decisions governments make as well.

Governments take the good times and spend and plan based on good times and then aren't prepared for the next down turn and that flaw makes them "bad" in the long run because each cycle digs the hole deeper. Even Keynes thought that you were to pay back debt created by stimulus during good times but, history reveals that doesn't work well in the way governments operate. The paying down of debt requires a reduction in spending and that leads to a new recession and instead of allowing the recession to play out, they try to stop it.

The error in Keynes is not that stimulus doesn't stimulate but that it makes the problem worse in the long run because it prevents recessions from doing what they are supposed to do and that is eliminate the excesses, flawed policies, and abuse of the system that took place during the "boom."

Not to be too picky or pedantic, my economic views are not Milton Friedman's monetarism, but those of the Austrian school, exemplified in Ludwig von Mises and Friedrich Hayek.

In the monetarist school of thought, essentially it is the rate of money growth that controls the economy, limited only by the awareness that growing the money supply too fast leads to inflation. But monetarists don't object to setting a money supply growth rate and living with a bit of inflation.

In the Austrian school of thought, government has a primary responsibility to maintain a stable currency, because the impetus for economic growth is businessmen's and consumers' expectations. Rapid expansion of the money supply initially lowers interest rates, but over a year or two fuels a rising rate of inflation.

Unfortunately, in the early stages of excessive monetary expansion, lower interest rates and money sloshing around the system gives businessmen and consumers a false signal. What they take to be prosperity leads to over-expansion, as in the housing market.

Only increases in lendable and investable funds arising from real savings (consuming less than we produce) can sustain a healthy and non-inflationary economic growth.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 03:30 PM

Tis what I wrote as Mr Brewton was posting:

The money supply is like the blood supply in our bodies. They are crucial organs. But on their own those crucial elements are not enough to keep the bodies healthy and alive. Other organs and institutions are essential in combination to keep things healthy and ticking.

You monetarist just view things too simplistically. That I guess is the nature of being libertarian. However, there is a web of things that keep us and the economy alive, which you continue to ignore.

(I hate this new signing in process. After I follow instructions this is what I see on my screen: The form you submitted contained the following errors. You must submit the word that appears in the image. Return to Previous Page.

I return to the previous page and have to copy and paste what I tried to submit and then submit again.

Signed, Frustrated)

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 03:36 PM

You are correct that several crucial "organs" are needed in a society, David.

My mother died after a blood clot blocked blood to the intestines and caused a lot of other problems to which at her age, being "gutted" didn't seem like something she wanted to endure and decided to not to have surgery and go on feeding systems.

The point is that the other organs survive or fail based on the blood which is the currency in a nation. If you control the money supply, you control the other organs.

For example we now have all kinds of organs, education, welfare, unemployment, Medicare, etc. but no money for them to the degree we need and no chance of getting the money.

The boom/bust cycles caused by control of money supply has slowly depleted the immune system of the patient until now, the patient can't recover.

What has to happen is the U.S. "die" and then a new U.S. rise from the ashes, being rebuilt on good and sound monetary and economic principles.

Unless that new nation understands why the money supply is the key and controls all the other things, they will possible rise, but only to fail again. To have that happen, then even in the poverty that will infest much of the U.S., education has to be such that the new leaders understand how in 1913 we destroyed the checks and balance and turned so much power over to a few people.

They need to study why the founders went to war with England because of the money control the Bank of England had which caused England to make the mistakes we been making now since 1913.

They need to study why stability, not rapid growth is the key and that growth has to be in a proper relationship to the culture of a nation, saving, investment and population.

They need to study that no matter the need, a nation has to pay for it and not use debt to try and push the cost to some other nation. Compare the positive account balance of Canada, to the U.S. which has the largest negative account balance in the world and you can see at least some of the need for paying as you go and using debt only as a last resort and only for short periods of time.

JanPBurr makes an excellent point that all was well until 100 years ago. She is also correct in pointing out how the huge forward momentum of America's economy continued on inspite of the new burdens of taxation and ever-increasing government programs and policies.

The overlooked counterpoint to that fact is that America was 300 years old at that time. From 1620 to 1920 America grew like crazy, with almost no central government, no taxes and very few government programs. The huge debts, inflation and current crises reflect what expanded government has brought us.

David complains that the current crisis was caused by the government failing its mandate to protect the people. Actually Big Government protected the Big People--the Madoffs, hedge fund traders, Wall Street tycoons, peanut farmers, corn growers, and every special interest that paid legislators to cut them a piece of the pie.

Government should just stay out of the way so ordinary people can make the good things happen.
Reagan would say the best government is the government that governs least. If we closed down 50 % of government, accross the board, and cut taxes 40 % we could post s surplus and live happily ever after.

I set it up selfishly, because I was getting between 300 and 800 spam comments per day, mostly on postings from a year or more ago. Deleting them was taking hours of my time every day.

I am hopeful that it won't be too troublesome for you, but please keep me informed. I'll talk to the techies, who may be able to make it easier.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 07:14 PM

Mr. Brewton,

I think the security code word works well as long as you do not use the "preview" function and edit your own comments.

It seems to freeze up after a few back-and-forths with preview and your own corrections. I think that once you go to the preview screen, security "forgets" that you have typed in the image.

If you make no corrections to your text, it works fine.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 08:50 PM

Mr. Jay:

Thanks for the information.

Posted by .(JavaScript must be enabled to view this email address) on 01/25 at 09:59 PM

"The money supply is like the blood supply in our bodies. They are crucial organs."

And you talk about people being "simplistic!"

Well, I submit that massive government interventions are like a gas attack--Too much fletus from overindulging in central regimentation.

"Money supply" is a complex issue, and has never been accurately defined or measured. A sound currency does help simplify trade, although on a small scale, barter systems have worked reasonably well. There were massive increases in prosperity prior to the 1800's with a variety of mediums of exchange. The Dutch ruled the world through its maritime fleet in the 16th century before anyone even mentioned "money supply."

Tinkering with the so-called money supply has not seemed to help anything--indeed, many of the last century's woes may have come from the central planners playing with paper money. Now they are playing with huge sums, and considering the ivory tower theorists who are doing the playing, I am not sanguine about the results.

That is true. I put it in a very simplistic manner because as you point out, money can be virtually anything, including "notched sticks," at one time in one culture.

However, the thing was, they needed something to designate "stored labor." Money is your labor stored in some medium.

In a barter society, you trade you skill at growing for some shelter by a person with construction skills. But, that doesn't work well when your skill isn't needed by the person whose skill you need but, which somebody else does need.

Societies then set a value on skills and labor and demand so that you could store your labor and use it later to buy something you wanted with that stored labor.

Until we return to some sound bases for determining the value of our "money" or "stored labor," we will continue to have problems with our monetary system. So, what is the best way? Market forces. However, that isn't always "fair," and so people often try to meddle with it and end up making it even worse and more unfair.

Tinkering, as you point out, is exactly the problem and now we have abandoned tinkering and are out to totally destroy any value our monetary system had but, with "good intentions."

From 1913 on, we have been on this course and from 1913 on, we have had many people in government and economics warn us where this would lead.